German business confidence fell for the first time in four months in October, signaling that a slowdown in global demand is taking its toll on Europe’s largest economy.

The Ifo institute’s business climate index declined to 108.2 from 108.5 in September. The median estimate was for a drop to 107.8, according to a Bloomberg survey of economists.

European Central Bank President Mario Draghi on Thursday all but promised further stimulus in December as weakening growth in emerging markets, cheap oil and a stronger euro threaten to push down prices and hamper the region’s recovery. While Germany’s export-oriented economy is vulnerable to these risks, it has benefited from solid consumer demand fueled by record-low unemployment so far.

“Business-confidence data suggests that the outlook for the German economy is not too bad; hard data, especially industry data, however, paint a different picture. The truth is somewhere in between,” said Johannes Gareis, an economist at Natixis SA in Frankfurt. “Investment and exports should suffer from the slowdown in China and the wider emerging markets. All in all, however, there is no reason to expect Germany to fall into a new recession.”

German investor confidence fell to the lowest level in a year this month amid Volkswagen AG’s emission scandal and a deteriorating export outlook. Sales abroad fell 5.2 percent in August, the most since the height of the 2009 recession, while factory orders and industrial output unexpectedly declined.

Source : Bloomberg